In October 2016, the average cost of cooking one standard portion of Imeretian Khachapuri was 3.39 GEL, which is 1% lower month-on-month (compared to September 2016), and 6.1 % lower year-on-year (compared to October 2015).

The Index is down due to a sharp decline in cheese prices. According to Kh-index, in October 2016, the price of one kg of Imeretian cheese was 7.49 GEL, which is 8.3 % lower than last year’s level (8.17 GEL).

In September 2016, the average price of cooking one Imeretian khachapuri stood at 3.43 GEL. Compared to the previous month (August 2016) the Khachapuri Index gained 8.6%. The upward trend in Index at this time of the year is mostly related to the seasonal increase in the price of cheese (due to dwindling supply of fresh milk).

While going up in monthly terms, the Index actually dropped 0.8% compared to the same time of last year (y/y). As shown in the chart, the main contributors to Khachapuri Index annual deflation were eggs (-7%) and cheese (-3%). All other ingredients increased in price: milk (1%), flour (2%), yeast (9%), and butter (17%). Interestingly, prices fell y/y for locally produced goods (eggs and cheese); prices went up for goods that are imported (yeast and butter) or use imported intermediate inputs in their production (flour and milk).

The average price of cooking one Imeretian khachapuri currently stands at 3.43 GEL. Compared to the previous month (August 2016) the Khachapuri Index gained 8.6%, however in yearly terms (compared to September 2015), the Index dropped 0.8%.

With the milk supply dwindling for seasonal reasons, cheese prices are on the rise in all Georgian cities. Interestingly, however, the highest monthly increase (27.7%) in the price of Imeretian cheese was recorded in Telavi, the capital of the Georgia’s main wine producing region, Kakheti. Moreover, cheese prices in Telavi are up not only month-on-month, but also compared to last year’s September (by 4.9%). At 7.66 GEL per kg, Telavi is currently the most expensive place for Georgian cheese lovers, ahead of Kutaisi, Batumi and Tbilisi.

While gradually increasing since June, in line with its seasonal trend (driven by a gradual decline in the production of fresh milk), the Khachapuri Index remains almost 10% below its level exactly one year ago. Constructed as a weighted average of the prices of various khachapuri ingredients, the Index is particularly sensitive to changes in the price of Imeretian cheese, its most expensive ingredient. The recent spell of annual deflation in the Khachapuri Index is thus a reflection of a peculiar sagging in the price of cheese (see table). For example, in August 2016, one kilogram of Imeretian cheese fetched only 6.4GEL, 18% less than in August of last year (7.8GEL).

Kh-Index Methodology

Inspired by the Big Mac Index of the Economist magazine, the ISET Khachapuri index tracks inflation by using the most popular Georgian food, the Khachapuri. As opposed to other inflation indices relying on a complex basket of consumer goods the ISET Khachapuri index uses a basket for calculating inflation that includes only those ingredients that are needed to cook one Imeretian khachapuri - flour, cheese, yeast, milk, eggs, and butter. It also includes energy costs - gas and electricity.